Despite the emergence of DeepSeek, a Chinese startup claiming to match Western AI capabilities at a fraction of the cost, Microsoft and Meta CEOs stand by their significant investments in infrastructure and computing power, arguing it's crucial for long-term competitiveness. The companies emphasized the exponential growth in AI demand and the need for robust capacity to meet it. Microsoft committed $80 billion to AI this fiscal year, while Meta pledged $65 billion. However, Microsoft's stock dipped after falling short of Azure cloud growth estimates, raising questions about monetization strategies. Meta, on the other hand, showed a strong fourth quarter but a less optimistic sales forecast for the current period.
Days after Chinese upstart DeepSeek revealed a breakthrough in cheap AI computing that shook the US technology industry, the chief executives of Microsoft and Meta defended large spending that they said was key to staying competitive in the new field.
DeepSeek’s quick progress has stirred doubts about the lead America has in AI with models that it claims can match or even outperform Western rivals at a fraction of the cost, but the US executives said on Wednesday that building huge computer networks was necessary to serve growing corporate needs. \“Investing ‘very heavily’ in capital expenditure and infrastructure is going to be a strategic advantage over time,” Meta chief executive Mark Zuckerberg said on a post-earnings call. Satya Nadella, chief executive of Microsoft, said the spending was needed to overcome the capacity constraints that have hampered the technology giant’s ability to capitalise on AI. “As AI becomes more efficient and accessible, we will see exponentially more demand,” he said on a call with analysts. Microsoft has earmarked $80 billion for AI in its current fiscal year, while Meta has pledged as much as $65 billion towards the technology. That is a far cry from the roughly $6 million DeepSeek said it has spent to develop its AI model. US tech executives and Wall Street analysts say that reflects the amount spent on computing power, rather than all development costs.\Shares of Microsoft – widely seen as a front-runner in the AI race because of its tie to industry leader OpenAI – were down 5 percent in extended trading after the company said that growth in its Azure cloud business in the current quarter would fall short of estimates. “We really want to start to see a clear roadmap to what that monetisation model looks like for all of the capital that’s been invested,” said Brian Mulberry, portfolio manager at Zacks Investment Management, which holds shares in Microsoft. Meta, meanwhile, sent mixed signals about how its bets on AI-powered tools were paying off with a strong fourth quarter but a lacklustre sales forecast for the current period. “With these huge expenses, they need to turn the spigot on in terms of revenue generated, but I think this week was a wake-up call for the US,” said Futurum Group analyst Daniel Newman. There are some signs though that executives are moving to change that. Microsoft CFO Amy Hood said the company’s capital spending in the current quarter and the next would remain around the $22.6 billion level seen in the second quarter. “In fiscal 2026, we expect to continue to invest against strong demand signals. However, the growth rate will be lower than fiscal 2025 (which ends in June),” she said.
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